Monday, March 8, 1999 Published at 22:26 GMTWorldNo truce in banana warBananas: First flash point as trade war threatensA meeting aimed at defusing the bitter banana trade dispute between the US and Europe has failed to reach a truce.

A majority of World Trade Organisation (WTO) members condemned moves by Washington to impose sanctions on a range of European goods.

But the US says it will press on with its plan because, it says, the European Union is continuing to favour banana exporters in the Caribbean and Africa over American companies operating in Latin America.

The WTO summit in Geneva was called after the US imposed tariffs of 100% on a wide range of European imports.

The tariffs will only come into effect if the WTO decides the EU's banana policy is against WTO rules.

Ambassador Roderick Abbott, the head of the EU trade delegation in Geneva, said the US had acted illegally by effectively imposing sanctions on European products.

One EU official said that if the Caribbean countries lost their banana export markets then some farmers would turn to the drugs trade.

And Edwin Laurent, the East Caribbean States Ambassador to the EU, agreed that it was a real fear.

He said: "If there was a loss of the banana industry there would be such economic instability _ it is quite likely that there would be a great escalation in illegal activity and a tremendous increase in the drug production and trafficking."

American officials were adamant that the Clinton administration's actions did not violate world trade rules.

Ambassador Rita Hayes, the head of the US delegation, said: "It's up to the Europeans. They have to bring their banana trade regime into conformity."

Washington announced last week that importers of a range of European products - including Scottish cashmere sweaters and Italian cheese - would have to post bonds equivalent to 100% tariffs on the goods' value.

The US wants to impose these sanctions on EU exports to compensate for the $520m it estimates that American banana exporters have lost as a result of the alleged European policy.

But the EU claims the US has shown "blatant disregard" for WTO dispute settlement procedures and is acting illegally.

The EU maintains that it has changed its policy on banana imports to bring it into line with WTO regulations.